The systematic recording and organising the financial transaction and the information related to the business on a day to day basis is known as bookkeeping. It ensures that the individual financial recorded transaction is correct and up to date which maintains the accuracy of the account and for the flexibility of the business. Let us know more about bookkeeping in this guide by H&R Block India.
In businesses and other organisations, there are two common bookkeeping systems used, i.e. single-entry bookkeeping system and the double-entry bookkeeping system.
Only income and expense accounts are used by single entry bookkeeping, which is recorded primarily in a journal of revenue and expense.it is mostly accepted by much small businesses. Cash book is the initial record in single entry bookkeeping which is like to checking register; it divides income and expenses to a different account of income and expense. For petty cash, accounts payable and receivable, and other relevant transactions such as inventory and travel expenses different account record are maintained in the single-entry-system.
To record the financial transaction in Double-entry accounting system at least two entries are required which occur in the form of asset, liability, equity, expense, or revenue accounts. Every transaction or event changes at the minimum two different nominal ledger accounts because it is a set of rules for recording financial information in a financial accounting system.
Bookkeepers are the individuals who do bookkeeping, to manage the transaction to be recorded in the systematic form of the companies, as they are given responsibility to manage the transaction which is accurate and updated on a day to day basis. To prepare the books of account which cannot be initiated if the transaction is not entered in the books.
It is an illustrative and sequential day-to-day record of financial transactions also known as the book of original entry. To enable posting to ledgers the daybook’s details must be formally entered into journals.
The Day book includes
Whenever there is a purchase of small-value (expenses for stationery, casual postage, hospitality which later get reimbursed with the reason of how it was spent) the record is maintained but later gets transferred to the ledger and final accounts, so this record is known as petty cash book, it is generally maintained by a petty or junior cashier.
In the general journal daybook, journals are recorded. It is an illustrative record of financial transactions in the general ledger before their values are accounted as debits and credits. The company can maintain one journal for all transactions, and if required keep several journals based on different activities for example sales, cash receipts, revenue, etc. making transactions for future reference which is easy to summarise. There must be an equivalent credit journal entry for every debit journal entry recorded so that the accounting equation is balanced.
It is a record for the accounting. As these accounts are recorded separately, showing their opening/closing balance. It is the summary of all the amount entered while preparing journal date wise. So, the ledger takes every financial transaction entry from the journal and record the same to its similar account for each transaction which is listed in the journal.it also sum up each account which helps to prepare the balance sheet and the income statement (profit & loss account). There is two type of ledgers which are used in bookkeeping: sales ledger & purchase ledger.
The below are the common transactions and task involved in bookkeeping:
In bookkeeping, it is also useful for individuals and non-profit organisations and also businesses.
Accrual-based accounting is the books of accounts when the transactions are recorded, for the particular product or service they make the receipt of payment. In assessing the financial health of the organisation, this accounting is more appropriate.
Example: You purchased 150 units of a product, and you will pay for its next month. If these Transaction gets recorded through an account payable (liability) account. It becomes an accrual form of accounting.
It is an accounting method only revenues and expenses are recorded only if cash transaction is made. In assessing the financial health of the organisation, this accounting is unappropriated.
Example: You purchased 150 units of a product and will pay for its next month. So there will be No transaction recorded, so it comes under cash-based accounting.
|Bookkeeping is concerned with the systematic recording and organising the financial transaction.||Accounting is concerned with summarising of such recorded financial transactions|
|In bookkeeping, the ultimate aim is systematic recording and organising the financial transaction.||In accounting, the ultimate aim is Preparing financial statements.|
|By bookkeeping records, it does not help the Managers to take a decision.||By Accounting records, it helps to assist managers to take a decision.|
|Branches are not there in bookkeeping.||Cost Accounting, Management Accounting etc. are the branches of Accounting.|
|In bookkeeping, it does not require any special skill or knowledge, as bookkeepers do it.||Accounting requires special accounting knowledge and skills, as accountants do it.|
|A/C/ Acc – Account|
|A/R – Accounts receivable|
|A/P – Accounts payable|
|B/S – Balance sheet|
|c/d – Carried down|
|b/d – Brought down|
|c/f – Carried forward|
|b/f – Brought forward|
|Dr – Debit side of a ledger. “Dr” stands for “Debit register”|
|Cr – Credit side of a ledger. “Cr” stands for “Credit register.”|
|G/L – General ledger; (or N/L – nominal ledger)|
|PL – Profit and loss; (or I/S – income statement)|
|P/R – Payroll|
|PP&E – Property, plant and equipment|
|TB – Trial Balance|
|GST – Goods and services tax|
|VAT – Value added tax|
|CST – Central sale tax|
|TDS – Tax deducted at source|
|AMT – Alternate minimum tax|
|EBITDA – Earnings before interest, taxes, depreciation and amortisation|
|EBDTA – Earnings before depreciation, taxes and amortisation|
|EBT – Earnings before tax|
|EAT – Earnings after tax|
|PAT – Profit after tax|
|PBT – Profit before tax|
|Depr/ Dep – Depreciation|
|CPO – Cash paid out|
|CP – Cash Payment|
A. It is the financial accounting system. Petty cash system is the most common imprest system. The base characteristic of this system is that a fixed amount is reserved, which after a certain period because money was spent, the amount will be again reserved.
A. Yes, Bookkeepers are employed in many industries, to do payroll services.
A. No, but they can obtain optional certification or license through national organisations.
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